Dollar Cost Averaging - How long?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
Oleanmike
Posts: 46
Joined: Sun Oct 13, 2013 12:14 am

Dollar Cost Averaging - How long?

Post by Oleanmike » Sun May 24, 2020 12:17 pm

I am sitting on a lot of cash (7 figures) that I want to get back into my asset allocation via dollar cost averaging. I will be using index bond and equity funds. It will be in a combination of taxable, IRA and Roth accounts.

My plan is to do equal amounts once a month for the next six months in each account. My question is, does a six month time frame seem right?

Is there a time of the month that would be best (before or after bond funds declare or distribute monthly)?

I have been retired for 8 years and and our SS and pension covers 80% of our expenses. Travel was our largest expense and that will be greatly curtailed for the foreseeable future.

Preservation of capital is my primary goal.

Thanks for any thoughts.

rbaldini
Posts: 1436
Joined: Mon Mar 23, 2015 3:20 pm

Re: Dollar Cost Averaging - How long?

Post by rbaldini » Sun May 24, 2020 12:21 pm

Just go all in now. If that sounds scary, pick an asset allocation that doesn't sound scary. Done. No market timing necessary.
Last edited by rbaldini on Sun May 24, 2020 12:33 pm, edited 2 times in total.

mhalley
Posts: 8298
Joined: Tue Nov 20, 2007 6:02 am

Re: Dollar Cost Averaging - How long?

Post by mhalley » Sun May 24, 2020 12:23 pm

I have read several articles about dca, and they all suggested different periods, ranging from 6 months to 18 months being the longest period. You pays your money and takes your choice. Just pick a time frame and stick with it.

sd323232
Posts: 515
Joined: Thu Jun 21, 2018 4:45 pm

Re: Dollar Cost Averaging - How long?

Post by sd323232 » Sun May 24, 2020 12:30 pm

why not go all in. 2nd stimulus is on the way, im sure there will be at minimum 4-5 stimulus total. Dow jones hitting 30K this year is good possibility.

User avatar
Eagle33
Posts: 696
Joined: Wed Aug 30, 2017 3:20 pm

Re: Dollar Cost Averaging - How long?

Post by Eagle33 » Sun May 24, 2020 4:44 pm

Lump sum 1/2 now and DCA over the next 6-months. Guaranteed to be at least half right.
Rocket science is not “rocket science” to a rocket scientist, just as personal finance is not “rocket science” to a Boglehead.

FrankTheViking
Posts: 91
Joined: Wed Jan 08, 2020 3:44 pm

Re: Dollar Cost Averaging - How long?

Post by FrankTheViking » Sun May 24, 2020 4:54 pm

If I received a windfall today so to speak I would go all in now. If I were to try and help you time the market I don't know. Personally I think the markets going to tank further over the next 6 months / year so I guess wait until it seems safe. Don't know how long that will be..... it likely will never be. Security is an illusion, with stocks it's non-existent.
No EF. 80% Total U.S. / 20% Total International. 100% equity. Is there a gun to your head? Is there a tiger in the room? No? What's the problem?

retiredjg
Posts: 40820
Joined: Thu Jan 10, 2008 12:56 pm

Re: Dollar Cost Averaging - How long?

Post by retiredjg » Sun May 24, 2020 4:58 pm

The "right" answer is to throw it all in now, but I think it is understandable that might be a scary prospect if you have been out of the market for awhile.

If this money just came out of the market, you should just put it all right back in this week. A sideways move.

A 6 month DCA is a very good approach. Putting a chunk in now and DCAing the rest over 6 months is also a very good approach.

annu
Posts: 691
Joined: Mon Nov 04, 2019 7:55 pm

Re: Dollar Cost Averaging - How long?

Post by annu » Sun May 24, 2020 7:36 pm

Why did you stop or pull money out?

If that concern is something you feel has been addressed, probably going all in at 1 time should be no brainers for you.

As time in market is better than timing it.

But if there is something stopping you from doing that, it is not a very bad problem to have, sitting on cash.
I am in same boat, but bot much as your investment, unless I can say yes, I can go all in today, going to stay out.
I got super lucky, pulled out on Feb 14th, so far not able to go back in, and will be fine missing little bit on gains, as feel should wait another quarter atleast to see impact of covid, and then there are elections, so lots of claims on with sides which are more politics than real data, but I have real money that I would rather not lose.
Even if there is another stimulus, that money has to come from somewhere, due to elections this is not a concern right now, but it is real problem. So unless tax are increased, I am not sure how we can keep doing this, as many jobs will bot be comming back anytime soon.

Rosencrantz1
Posts: 561
Joined: Tue Sep 10, 2019 12:28 pm

Re: Dollar Cost Averaging - How long?

Post by Rosencrantz1 » Sun May 24, 2020 8:53 pm

Eagle33 wrote:
Sun May 24, 2020 4:44 pm
Lump sum 1/2 now and DCA over the next 6-months. Guaranteed to be at least half right.
+1 Statistically, it's better to lump sum - but, I can certainly see the apprehension in doing that (all in at once).

terran
Posts: 1344
Joined: Sat Jan 10, 2015 10:50 pm

Re: Dollar Cost Averaging - How long?

Post by terran » Sun May 24, 2020 9:33 pm

Dollar cost averaging is a regret minimization framework, not (as others have already said) the optimal way to invest. The closer you can get to a single lump sum the better, on average. So what is the shortest amount of time over which you can dollar cost average such that you won't regret temporary drops in value (if any)?

User avatar
Noobvestor
Posts: 5570
Joined: Mon Aug 23, 2010 1:09 am

Re: Dollar Cost Averaging - How long?

Post by Noobvestor » Sun May 24, 2020 9:59 pm

rbaldini wrote:
Sun May 24, 2020 12:21 pm
Just go all in now. If that sounds scary, pick an asset allocation that doesn't sound scary. Done. No market timing necessary.
+1

The problem with DCA is that it just forces you to make market-timing decisions on top of allocation decisions, as you're now discovering.

The answer to the question is avoiding having to ask it in the first place. :beer
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

Dandy
Posts: 6283
Joined: Sun Apr 25, 2010 7:42 pm

Re: Dollar Cost Averaging - How long?

Post by Dandy » Mon May 25, 2020 7:01 am

My approach was to put a decent chunk in immediately according to your desired allocation -- maybe 25% or so. The rest DCA automatically over 12 months. Any month where equities drop a lot - double up the DCA amount for that month with an eye toward rebalancing needs.

Gets some invested quickly, gets maybe some extra buys when the market is down and gets you fully invested usually in less than a year.

User avatar
goingup
Posts: 3839
Joined: Tue Jan 26, 2010 1:02 pm

Re: Dollar Cost Averaging - How long?

Post by goingup » Mon May 25, 2020 10:03 am

Oleanmike wrote:
Sun May 24, 2020 12:17 pm
I am sitting on a lot of cash (7 figures) that I want to get back into my asset allocation via dollar cost averaging.
Why are you sitting on a lot of cash? The answer to that can guide your next step forward. If you sold a house/business or inherited 7 figures and already have an AA, then I'd say put 20% in immediately and add the rest over the next 6-12 months.

If you're sitting on 7 figures cash because you panicked and sold out then you may need to think harder about how not to do that again. You may want a better plan, firmer resolve, or even turn over the keys to a financial advisor.

User avatar
ruralavalon
Posts: 18501
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Dollar Cost Averaging - How long?

Post by ruralavalon » Mon May 25, 2020 11:03 am

Oleanmike wrote:
Sun May 24, 2020 12:17 pm
I am sitting on a lot of cash (7 figures) that I want to get back into my asset allocation via dollar cost averaging.
First pick an asset allocation better suited to your risk tolerance.

Eagle33 wrote:
Sun May 24, 2020 4:44 pm
Lump sum 1/2 now and DCA over the next 6-months. Guaranteed to be at least half right.
+ 1.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

dbr
Posts: 32820
Joined: Sun Mar 04, 2007 9:50 am

Re: Dollar Cost Averaging - How long?

Post by dbr » Mon May 25, 2020 11:28 am

I am curious how you heard about DCA and what you hope that tactic will do for you.

I think questions about DCA are really unresolved issues regarding asset allocation, but I could be wrong.

Post Reply